Offset mortgage vs savings

An offset mortgage is where you have savings and a mortgage with the same lender and your cash savings are used to reduce – or 'offset' – the amount of mortgage interest you're charged.

Instead of a standard savings account, you could place your savings in an offset account linked to your mortgage. This means you won't pay interest on the mortgage debt of the equivalent amount of the savings. Use this calculator to work out if an offset mortgage works out better for you.

How big is your mortgage?

Size of mortgage

£

Remaining mortgage term

How much do you have in savings?

Mortgage details

Now we'll compare using a standard mortgage and a savings account vs using an offset mortgage. You don't need to have applied for the products below yet. Just tell us the best rates you've found for each.

Using a standard mortgage

Using an offset mortgage

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Will you slash the interest you pay?

Here's how much offsetting your savings could save on your monthly and annual mortgage repayments, and by how long it could reduce the term of your mortgage (assuming rates stay the same).

The tables below factor in any interest lost on your savings to calculate the true cost over each year. Offsets generally win over the long-term (see graph), but you could save more by going for a cheaper short-term standard deal and switching to another when the term is up.

Note: Those with a relatively small sum in savings compared with their mortgage balance will probably not find offset the best option. Higher-rate taxpayers who earn less from their savings after tax is deducted may be best off with an offset, compared with the top paying savings account. They also suit those who'd like to overpay but don't want to lose access to their savings.

Standard mortgage + savings vs offset mortgage

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Mortgage & Savings

Offset mortgage

Monthly repayment

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IN FIRST YEAR

Interest cost

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Interest earned on savings

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Net interest cost

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IN YEAR {{ compareOver }}

Interest cost

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Interest earned on savings

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Net interest cost

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TOTAL COST OVER {{ compareOver }} YEARS

Interest cost

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Interest earned on savings

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Net interest cost

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OVER FULL TERM*

Full term

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Interest cost

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Interest earned on savings

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Net interest cost

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Amount left in savings

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*Full-term comparison is a bit misleading. Offsetting generally wins over the long-term, but by going for a cheaper short-term deal then switching later, you could save even more.

Total interest cost

IMPORTANT! Please read...

This information is computer-generated and relies on certain assumptions. It has only been designed to give a useful general indication of costs.

It's important you always get a specific quote from the lender and double-check the price yourself before acting on the information. We cannot accept responsibility for any errors (please report faults above).

Assumptions

In order to create these results, we have had to make a few assumptions:

1) Interest is charged monthly.

2) Interest rate stays the same over the term.

3) If you selected 'Interest only', we assume your standard monthly payment doesn't decrease even if you pay off some of the balance.

Your repayments are fixed for the length of the initial deal – say, 2, 5, or even 10 years.

Fees the lender charges to take out a mortgage. These days the fee can be as important as the rate when it comes to the overall value of the deal.

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